NatWest Group (NWG.L) has lined up a buyer for the bulk of its consumer business at Irish franchise Ulster Bank, as part of its previously announced plans to withdraw from the Republic of Ireland.
NatWest said on Friday it had signed a memorandum of understanding — an early stage deal agreement — with Irish financial services group Permanent TSB (IL0A.IR). Permanent has tentatively agreed to take on core parts of Ulster's performing retail banking business.
Permanent is targeting: a €7.5bn (£6.4bn, $8.8bn) book of non-tracker mortgages; a €16.1bn book of loans to small businesses; Ulster's asset finance operation Lombard; and 25 bank branches. Up to 500 Ulster Bank staff will join Permanent as part of the deal.
NatWest chief executive Alison Rose said: "In line with our strategy of a phased withdrawal from the Republic of Ireland, I am pleased that we are today announcing a significant update in the form of this non-binding memorandum of understanding with Permanent TSB.
"This builds on the recently announced sale of the majority of Ulster Bank's performing commercial banking business to Allied Irish Bank. Our focus remains on supporting our customers and colleagues as we continue our withdrawal from the Republic of Ireland."
Eamonn Crowley, chief executive of Permanent TSB, said: "We see this as a once in a generation opportunity to fast-track the growth of an Irish bank with a strong community and customer service ethos that has evolved over its 200-year history.
"It also supports the investments we are making in the transformation of our in-branch and digital banking services."
NatWest will receive some cash as part of the deal as well as up to 20% of shares in Permanent TSB. Both sides cautioned that the deal is still in early stages and subject to due diligence. Should it go through, NatWest assured Ulster Bank customers that they won't notice any immediate changes.
"We are conscious that there is still significant work to be done to agree legally binding agreements later this year, but we are optimistic that we can work with all parties to create an enlarged Permanent TSB with an increased national footprint that will provide enhanced products and services to our present and future customers," Crowley said.
Should terms be agreed, Permanent TSB is expected to take over the targeted parts of Ulster within 18 months.
NatWest, formerly known as Royal Bank of Scotland, announced plans to exit the Republic of Ireland earlier this year as part of efforts to slim down the bank and focus on its core business of UK banking.
Shares in NatWest ticked half a percent higher in London trade.
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